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Does Your Retirement Portfolio Hold These 3 Mutual Fund Misfires? - January 07, 2020 (Revised)

Zacks Equity Research

If your financial advisor made you buy any of these "Mutual Fund Misfires of the Market" with high expenses and low returns, you need to reassess your advisor.

High fees plus poor performance: It's a pretty simple formula for a bad mutual fund. Some are worse than others - and some are so bad that they have earned a "Strong Sell" on the Zacks Rank, the lowest ranking of the nearly 19,000 mutual funds we rank daily.

First, let's break down some of the funds currently part of our "Mutual Fund Misfires of the Market." If you happen to have put your money into any of these misfires, we'll help assess some of our best Zacks Ranked mutual funds.

3 Mutual Fund Misfires

Now, let's take a look at three market misfires.

Touchstone Ultra Short Duration Fixed Income A TSDAX: This fund has an expense ratio of 0.69% and a management fee of 0.25%. Without even doing any in-depth analysis, just the fact that you are paying more in fees than you're earning in returns is reason enough not to invest. TSDAX is part of the Government Bond - Short fund category. Often seen as risk-free assets, these funds hold securities issued by the U.S. federal government and they focus on the short end of the curve. The fund has lagged performance-wise, so perhaps a simpler index future investing strategy might be more effective.

Legg Mason BW International Opportunities Bond I LWOIX: 0.75% expense ratio, 0.5%. LWOIX is a Non US - Equity option, focusing their investments acoss emerging and developed markets, and can often extend across cap levels too. This fund has yearly returns of 1.29% over the most recent five years. Another fund liable of having investors pay more in charges than what they receive in return.

AllianzGI Ultra Micro Cap A GUCAX - 1.80% expense ratio, 1.1% management fee. This fund has yielded yearly returns of 1.63% in the course of the last five years. Too bad!

3 Top Ranked Mutual Funds

There you have it: some prime examples of truly bad mutual funds. In contrast, here are a few funds that have achieved high Zacks Ranks and have low fees.

Fidelity Advisor Small Cap Growth A FCAGX: 1.32% expense ratio and 0.84% management fee. FCAGX is a Small Cap Growth mutual fund and tends to feature small companies in up-and-coming industries and markets. With an annual return of 12.92% over the last five years, this fund is a winner.

MFS Mass Investors Intrinsic Growth Stock R6 MIGNX has an expense ratio of 0.38% and management fee of 0.33%. MIGNX is a part of the Large Cap Growth mutual fund category, which invest in many large U.S. companies that are expected to grow much faster compared to other large-cap stocks. Thanks to yearly returns of 14.38% over the last five years, MIGNX is an effectively diversified fund with a long reputation of solidly positive performance.

Baird Midcap Investor BMDSX has an expense ratio of 1.06% and management fee of 0.75%. BMDSX is a Mid Cap Growth mutual fund. Mid Cap Growth funds pick stocks--usually companies with a market cap between $2 billion and $10 billion--that demonstrate extensive growth opportunities for investors compared to their peers. With yearly returns of 11.20% over the last five years, this fund is well-diversified with a long reputation of salutary performance.

Bottom Line

We hope that your investment advisor (if you use one) has you invested in one or all of the top-ranked mutual funds we've reviewed. But if that is not the case, and your advisor has you invested in any of the funds on our "worst offender" list, it might be time to have a conversation or reconsider this vitally important relationship.

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(We are reissuing this article to correct a mistake. The original article, issued on January 07, 2020, should no longer be relied upon.)


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